Withdrawal of licenses and dynamics of private individuals’ deposits 16

Real sector: factors and trends 19

Situation in industry 21

IET Monthly Trend Survey: January 2000 23

Situation in the farm sector 25

Foreign trade 26

Economy and politics in January 2000

Mr. Eltzin’s early resignation has become the factor, which determines the development of economic and political situation in the country during the forthcoming months.

The markets consider the forthcoming presidential elections and, accordingly, the prompter solution of the political uncertainty to be a factor which undoubtedly should have a favorable impact on the country’s economic development, which was proved by the growth in the quotations of domestic securities, both corporate and government.

The beginning of 2000 was signified by the creation of a window of opportunity for a real breakthrough in the sphere of legislation: such bills as the bill on land, Tax Code, etc., have been considered and revised by the State Duma for years, however the constant opposition of the left- wing majority to the executive branch resulted in the failure to formulate the state’s position towards the said matters which are essential for the economy. Meanwhile, the whole number of factors in place creates a unique opportunity for a real advancement with respect to the establishment of the legal framework for the multi-sectoral market economy. To such factors one can attribute, first, the pre-election intentions of the Premier which should stimulate the government’s activity. The other factor, secondly, is a powerful pro-government faction in the Duma (Unity and People’s Deputy factions) which, particularly, control the whole range of crucial committees, plus a potential support by the right forces, which allows to count on the overcoming of the leftists’ opposition.

At the same time, there is the danger of destabilization of the financial and economic situation because of the pre- election populism, though at present there are a number of factors that counterbalance the said trend. For the acting President, a high rating of the central executive power supported by regional authorities, in the first place, and, secondly, chances to further use the military operation in Chechnya as the basis for the consolidation of the nation, decrease the political significance of populism ( i.e. financial injections which allegedly increase the population’s welfare). At the same time, the alliance between Unity and its allies with the right forces in the Duma effectively could block the Duma populists’ intentions.

Th pressure of the earlier made promises to pay off backwages to budget employees, the growing military expenditures (with the military operation continuing), the failure to achieve agreements with the international financial institutions, the euphoria born by the macroeconomic success of 1999 (which became an unexpected phenomenon for the majority of the analysts) still are the factors which may generate the use of the inflationary financing policy yet in the first Quarter 2000. The results of the executive power’s performance in January do not give sufficient grounds to judge priorities of its economic policy. The mere pragmatism and clear ignorance of any ideological principles once again demonstrated by Unity during the parliamentary crisis in January 2000 do not allow the exclusion any scenarios of the further development of the situation as well.